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I purchased a piece of equipment from a German co. gave them…

Customer Question
Hello I purchased a...

Hello I purchased a piece of equipment from a German co. gave them a deposit of app $40k and now they are filling for insolvency.

Accountant's Assistant: Has anything been filed or reported?

Yes they sent me a document from a court in Dresden Germany that they are insolvent

Accountant's Assistant: Since laws vary from place to place, what state is this in?

We are in Massachusetts, and the co. is located in Olbernhau Germany. The court they used is in Dresden Germany

Accountant's Assistant: Anything else you want the lawyer to know before I connect you?

That about sums it up

Submitted: 8 months ago.Category: Tax
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Answered in 28 minutes by:
9/13/2017
Tax Professional: Stephen G., Sr Income Tax Expert replied 8 months ago
Stephen G.
Stephen G., Sr Income Tax Expert
Category: Tax
Satisfied Customers: 7,439
Experience: Extensive Experience with Tax, Financial & Estate Issues
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Hello, my name is***** goal is to give you a complete & accurate answer. I am working on your request now & I will respond as soon as possible.

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Tax Professional: Stephen G., Sr Income Tax Expert replied 8 months ago

If you're asking what to do tax wise with the loss of the deposit, you would be entitled to a short-term capital loss.

Had the loss been the result of a default on an obligation in connection with a trade receivable, ie. for business conducted or services rendered) then the loss could be claimed as a business bad debt (ordinary deduction).

Since this was a cash deposit on equipment, it qualifies as a capital loss only.

Let me know if you have any follow-up questions.

Please remember to rate my response.

Thanks very much,

Steve G.

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